Analyst Lowers Sub Forecast

Collins Stewart media analyst Tom Eagan reduced his estimates for basic-cable subscriber additions for the second and third quarters, adding that rising household foreclosure rates should offset any potential gains from the digital transition.In a research note Friday, Eagan wrote that while household foreclosures were down 6% in May compared to April, they were up 18% year over year.Eagan also had anticipated that about 4% of over-the-air television viewers would convert to cable or satellite services. But with 60.2 million converter coupons being requested as of June 10, Eagan now expects about 525,000 OTA viewers, or 3.5%, will convert to cable or satellite."We still believe that foreclosures of nearly 1million houses in Q2 will offset much of the anticipated OTA gains," Eagan wrote. "More specifically, we now expect that the 152,000 incremental Q2 foreclosures (over Q1) will essentially offset the 158,000 Q2 converted OTAs."Eagan has adjusted his basic-subscriber growth forecast for the top cable operators accordingly. He now expects Comcast to lose about 165,000 basic customers in the second quarter (versus his previous estimate of 125,000 losses). Time Warner Cable should now lose about 35,000 basic subscribers (versus a gain of 5,000 customers) in the period, according to Eagan.

Cablevision Systems is now estimated to lose about 5,000 customers (vs. a 2,000 subscriber gain), Charter Communications losses are now expected to rise to 60,000 from Eagan's previous 50,000 and Mediacom Communications should lose about 8,000 subscribers in the quarter, compared to his previous prediction of a loss of 5,000 customers.

Eagan estimated DirecTV would gain 137,000 customers (flat with his previous estimate). His prediction of losses at Dish Network rose slightly from 124,000 to 130,000 customers. The analyst estimates that the cable sector will shed about 266,000 basic video customers in the second quarter, compared to his previous estimate of 160,000 losses.Eagan wrote that he expected some OTA conversion to bleed into the third quarter, which should reduce overall basic subscriber losses in the cable sector to 116,000, compared to his previous estimate of 128,000 subscriber losses.